Tuesday, December 13, 2011
Politics / Clout City / News The parking meter deal: still more hosing to come
Posted by Mick Dumke on 12.13.11 at 06:15 PM
Here’s a hint: the answer is no.
In a certain place and time—Chicago City Hall, 2008—a billion bucks may have seemed like a lot of dough for a few thousand antiquated parking meters.
Then Chicagoans realized that the city had also hocked its ability to control street traffic, granted police powers to a private entity, and committed to parking fee and fine increases for the next several decades.
City officials assured us that it was still a great deal because, while the city got a stack of cash up front, the long-term financial risk would be borne by the private investors.
“There are some very real risks associated with the metered parking system,” former city CFO Gene Saffold said in 2009. “The City has shifted those risks, however, from the taxpayers to the concessionaire.”
That’s right—the city outmaneuvered Morgan Stanley and the government of Abu Dhabi.
Or maybe, just maybe, the big-finance guys who plopped down all that money actually knew what was in the contract.
Which brings me to today’s Sun-Times, in which investigative reporter Chris Fusco reports on one of the many ways that the fine print helps the investors return risk to the city. That is, to us, the taxpayers.
Chicago Parking Meters, the firm created to run the parking system for the money guys, has asked the city for $13.5 million to cover the annual cost of disabled people who don't have to feed the meters.
Some of the disabled parkers are frauds, the Sun-Times notes—but most are not. And the real issue is that the contract was written so the city is on the hook in either case.
“The formula calls for Chicago Parking Meters to absorb some of that cost, based on a percentage of its annual revenues,” writes Fusco. “But, for 2010-2011, the formula capped the level of free disability parking that the company had to provide at $4.4 million—with the city’s taxpayers left to pick up the $13.5 million difference, according to documents obtained by the Sun-Times.”
To put that $13.5 million in perspective, it’s roughly $13.44 million more than the average teacher (or news reporter) earns in a year.
More to the point at hand, it’s about two-thirds of the amount—$20 million—the city was annually collecting from the meter system before the deal.
Hate to break the news, but that’s not the only risk-protection language in the meter agreement. The deal also guarantees ever-increasing revenues for CPM.
For example, if for any reason the city decreases the number or hours of meters, “then the existing system revenue will be less ... and the city will have to make up the difference in a quarterly cash payment,” according to a 2010 analysis by Standard and Poor’s.
On the other hand, if the city decides to raise rates or increase the hours or number of meters, “the concessionaire does not have to make any cash payment"—and CPM gets to keep the extra money.
The investors in this deal appear to have done their homework. They anticipated hauling in a bit more than $73 million in 2010—and the actual amount was just under $73 million, according to documents posted on the city’s website. Again, that's $50 million more than the city was able to wring out of the meters.
The company estimates that rate hikes in the coming years will boost its revenues fourfold by 2039, to $299 million annually.
Aides to Mayor Rahm Emanuel are quick to remind us—as if we’ve possibly forgotten—that former Mayor Richard M. Daley blessed us with this meter mess. Daley has since gone to work for Katten Muchin Rosenman, the law firm that the city paid $662,760 to draw up the porous meter contract. That basically means that taxpayers made a down payment on Daley’s private-sector salary.
But the door has revolved the other way too. The Sun-Times notes that CPM spokeswoman Avis Lavelle declined to comment on the disabled parking bill. That's okay—anyone with follow-up questions can catch her at the next meeting of the Chicago Park District board, to which Emanuel appointed her this spring.
The Sun-Times reports that Emanuel is fighting the disabled parking bill. Let’s hope he has better success than the rest of us when we get parking tickets.
And let’s hope he sticks with it. Earlier this year he vowed to pressure Morgan Stanley to renegotiate the meter deal. Then he backed down and said we were stuck with it.
Then he again promised he was looking into retooling it. “Know that I have people on the transition—and more than a person—working on this,” he said in April.
Then he backed down from backing down about backing down. “We are stuck with the contract,” he said in August.
Three months ago I asked the city for the results of Emanuel’s investigation into retooling the meter deal. As a government committed to transparency, they said they'd get back to me.
They haven’t.
City Hall insiders tell me there's good reason for wanting such questions to go away: even the mighty Rahm Emanuel can't rework the deal without refunding more money to the meter investors. And most of that cash is already gone.
Comments (7)
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Why can't Rahm just refuse to honor the contract like he did with the Chicago Teacher's Union?
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John,
The teachers union contract, as I suspect you know, specifically allowed the board to cancel the 4% raises if the financial situation deteriorated to the point where it couldn't be afforded. With more than a $600 billion deficit at CPS, obviously that provision went into effect and the board could legally cancel the raises. There is a reason why the union hasn't sued CPS over this. They've sued over many things but not this. It's because they know they would lose.
That's the difference between the union contract and the parking meter contract. Obviously, the parking meter lease deal was a horrible decision by the city and never should have happened. And if it did, the city should have insisted on terms that gave it more flexibility. But unfortunately, as far as I know the contract is ironclad and cannot be undone in any manner without the agreement of the other party.
"Hanie will do very well and the Bears are going to win very easily. I am confident about that." - The original IAC
I'm sure that the provision in the contract was not meant to single out handicapped parking but rather prevent the spread of official business permits that city hall and the aldermen give out like candy on Halloween. For those of us who work downtown and walk daily past dozens of alleged handicapped permits parked in the same spaces on the street for the entire workday it should come as no surprise. Probably the same reason why the handicapped spaces in the garages are always vacant.
You fail to mention that Chicago got the discounted cash flow up-front - over a billion dollars and that there is great risk to the parking company as we will be doing less driving in Chicago with better public transit, more biking and walking. Chicago will be designed more and more around pedestrians and bikers. Cars clog our city, should be costly and parking them should cost money as they pollute, destroy urban design and contribute to obesity. Chicago will luckily become less car friendly and there is much risk for the parking meter company. Also, what if Chicago goes the way of Detroit or St. Louis, not likely but not impossible. Car-oholics will drive everywhere (thinking of only themselves) as driving is still too cheap given its damage to so many aspects of society and the environment. The real scam is how the government subsidizes cars to the tune of billions of dollars every year. Finally, I would rather the private sector run many things as the government is so inefficient and union-controlled and extravagantly costly. Remember how McCormick Place almost lost most of its business and jobs because of the government unions?
Trees: I hope your predictions about public transit and the phase-out of driving are correct. But I would also note that the meter investors have taken this into account as well--they expect to make their money back in the next 30 to 40 years, not over the entire lifetime of the contract. That's why it's structured so they will be collecting $300m a year within two decades.
There are only two ways that I can see Chicago becoming much less car friendly in the future. The first is for there to be a huge increase in congestion that makes it much less convenient to get around by car then it already is. This would most likely be the result of a major increase in population and/or people working in the city. More people would choose public transit as a result but I don't think this is the scenario you are hoping for, Trees. Obviously, more people would also be driving and there will be still be very strong use of the parking meters. The second way there might be a major decrease in cars is if the city enacted specific policies that make driving less convenient. They could remove the ability to park in some areas or dramatically increase the rates (much higher than is scheduled to happen) to the point that very few people want to park. But, of course, the city couldn't do these things without basically having to pay back nearly all of the money it got from the deal (which, as you know, has almost entirely been used already).
And I don't think this would be desirable anyway. For Chicago to be a strong city with good quality of life, strong public transit, and walkable neighborhoods it needs to have successful businesses. And this cannot happen if there is not a reasonable level of parking. So I don't quite get how you see a scenario where Chicago successfully becomes more pedestrian and transit friendly while severely reducing the amount of cars and driving. I certainly don't see how anything like this could threaten the financial success of the parking meters. I can see how there might be a much lower percentage of people who get around by cars in the future. But I don't see how there could be a lower level of driving in raw numbers unless the city completely fails and goes the way of Detroit.
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